Loans paid through council rates could pay for green upgrades for NFPs

Posted on 16 Aug 2023

By Matthew Schulz, journalist, Institute of Community Directors Australia

Solar panels
Not-for-profits in three states and in 70 participating councils may qualify for “environmental upgrade finance” where funds are available for building upgrades that deliver a measurable environmental benefit, and are paid off via council rates.

The biggest challenge for many not-for-profits wanting to go green is finding finances or convincing landlords to pay for building upgrades.

Whether it’s solar systems and batteries, efficient air-conditioning, electric vehicle chargers or better insulation, one of the big barriers to entry is the upfront cost, and the fact that many NFPs don’t own the buildings they are based in.

That can make securing and managing finances a tricky business. Our research confirms asset ownership is an issue. Our survey last year, which informed the Greening the NFP Sector report, found almost half of all NFPs were tenants.

Greening the NFP Sector
Read now: ICDA's Greening the Not-for-profit Sector report

Those groups are faced with the challenge of convincing landlords to invest, where owners can’t see a clear economic return. In other organisations, directors are concerned they are personally liable for loans, or baulk at the financial risks of high initial costs for upgrades.

Yet despite the many financial and bureaucratic barriers, one for-purpose lending institution believes it could have the answers for many groups.

Over 20 years, the Sustainable Australia Fund has developed and promoted a new kind of finance, backed by legislation in three states.

Called “environmental upgrade finance”, funds are available for building upgrades that deliver a measurable environmental benefit, with loans repaid through council rates over periods of up to 20 years.

The for-purpose fund offers loans from $10,000 to $20 million to organisations wanting to invest in those green upgrades.

The key to payments is the partnerships with 70 local governments in Victoria, NSW, and South Australia. Those municipalities agree to help organisations access funds and help administer the payments.

There are restrictions to access the loans:

  • The land must be rateable, which rules out property on Crown land.
  • Properties must be commercial and not residential.
  • The local council must opt into the program.
  • The upgrade must have a measurable environmental benefit.

Sustainable Australia Fund spokesperson Georgette Godbolt said there was great potential for more not-for-profits to take advantage of the loan facility, with Queensland set to be the latest state to join the scheme.

Sustainable Australia Fund spokesperson Georgette Godbolt
Sustainable Australia Fund spokesperson Georgette Godbolt

“For not-for-profits where they don’t own their buildings, it’s a significant benefit, because this funding can fill that gap. That’s exactly where we’re able to help,” Mrs Godbolt said.

“This funding is designed so that a landlord can upgrade a building to benefit a tenant, and the tenant can contribute to the repayments.”

“According to your study (ICDA’s Greening the NFP Sector report) nearly half of all not-for-profits are leasing their properties. As a result, many don’t have the ability to retrofit because they don’t own those buildings – instead they’re at the mercy of their landlord.

“If they can have a conversation with the landlord and come to arrangement where, under an environmental upgrade agreement, they can make a small, regular contribution to that retrofit, it will enable that landlord to create a more resilient and valuable green building while allowing the tenant to benefit from savings, such as from lowering energy costs through solar power.”

Mrs Godbolt said the fund was keen to see the program expanded.

She urged not-for-profits that weren’t yet eligible to speak with local councillors and staff – such as members of economic development and sustainability teams – to check their local authorities were aware of the scheme.

“One of the common questions we get asked is: ‘What’s the catch?’, but really this product was designed by government to remove the catches and remove the barriers to sustainable investment.”

“I think one of the biggest catches is that not enough people know that this exists to help.”

Advocates of the funding model are understood to be pushing for legislation to enable other property types to be eligible for upgrade finance in future, such as agricultural infrastructure and social housing.

Among not-for-profits taking part in the scheme include the Northern Golf Club in Glenroy, Melbourne, which was stung into action by power bills of more than $50,000 a year. With the support of the local Merri-bek Council the club installed an 86kW system that has slashed the club’s energy consumption in half and saved $20,000-a-year.

More financing options for not-for-profits

While paying upfront from your budget is the best way to get the lowest price, not all organisations have the resources to fund such a major investment like this.

Other options include these:

  • Green loans – there are good low-interest loans available for green investments. CommBank offers "green vehicle and equipment finance”, for example, while Corena is a not-for-profit, volunteer-run organisation that provides zero-interest loans to pay for projects like installation of solar panels.
  • “Behind the meter” is a type of power purchase agreement (PPA) where an energy provider installs renewable energy equipment (typically solar panels) on a business’s site. The energy provider owns and maintains it. This means you don’t have to pay upfront for the system, yet you benefit from access to solar power. However, you must buy all the electricity generated by the system, whether or not you use it. Seek expert advice before entering into a PPA.
  • Many grantmakers provide grants for solar and similar projects. As part of the Net Hero Zeroes initiative, Our Community (ICDA's parent company) has provided cost-free access to part of the Funding Centre database which summarises green grants.

More information

Sustainable Australia Fund | Case study - Golf club basks in solar savings
Help sheet: More finance options for environmental upgrades
Net Zero Heroes: More guidance for environmentally-aware not-for-profits
Case study: Heritage town turns to the sun to bury use of fossil fuels

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